ETFS Capital Urges WisdomTree Shareholders to Withhold Board Vote

ETFS Capital, which owns 10% of WisdomTree, called for replacement of the company's senior leadership.

ETFS Capital, etf.com's parent company, hammered WisdomTree Inc.'s leadership in a letter and urged shareholders to abstain from re-electing the ETF issuer’s board members.

In an escalation of a long-simmering conflict over WisdomTree’s direction, ETFS Capital chairman Graham Tuckwell sent a letter March 21 calling for a change-in-course for the New York-based ETF issuer. London-based ETFS Capital, owner of 10% of WisdomTree, said in the letter that a group of independent directors should be brought on to explore restructuring options, including selling the company.

“As a result of this misguided ‘transformation’ strategy, WisdomTree lost focus on the core ETF business, which despite record AUM, suffers from poor profitability,” Tuckwell wrote. “Consequently, WisdomTree trades at a significant discount to its intrinsic value if it were a well-run pure-play ETF business.”

ETFS Capital became WisdomTree's top shareholder in April 2018, when it sold a business to the company and took most of the $611 million payment in stock. The companies have battled over WisdomTree's direction over the past few years, and they've been unable to privately come to an agreement, according to the letter. WisdomTree, which has $77 billion under management in 78 ETFs, publicly rejected ETFS Capital’s suggestion last month that they sell parts of their business and replace their leadership.

Even though WisdomTree’s (WT) stock is up 31% year to date, Tuckwell argued that the value of the company is still far higher than the stock price reflects. He argued that the company is worth $15.5 per share on a standalone basis. Shares currently trade at $9 per share.

WisdomTree declined to comment and directed inquiries to its March 18 press release that said the firm's board voted to implement amendments to its stakeholder rights in order to "safeguard the interests of all stockholders in the face of activism concerns, as described in the Board's response to the most recent demands of WisdomTree stockholder ETF Capital Limited." 

Tuckwell implored shareholders in his Thursday letter to withhold their votes on the company’s board, escalating the conflict.

“[A]s a referendum on the Company’s failed diversification strategy agnd its refusal to unlock value through a strategic review process, we intend to Withhold our votes from members of the Board at the upcoming shareholder meeting. We invite other shareholders to do the same,” wrote Tuckwell in the letter.

WisdomTree’s Board of Directors includes Independent Chair of the Board Win Neuger and WisdomTree founder and former CEO Jonathan Steinberg.

WisdomTree’s Crypto Efforts Under Fire

ETFS Capital has been particularly critical of WisdomTree's efforts to move into the cryptocurrency space. WisdomTree is one of ten companies that debuted a novel spot bitcoin fund in mid-January after the Securities and Exchange Commission finally approved the vehicles. Yet ETFS Capital said that the new fund, along with the firm’s WisdomTree Prime digital asset app, has “failed to generate any meaningful market interest.”

The $74 million WisdomTree Bitcoin Fund (BTCW) has accumulated the least assets of any of the ten bitcoin funds, which have altogether brought in over $12 billion in inflows, according to Bloomberg data.

The ETF issuer’s largest fund is the WisdomTree Floating Rate Treasury Fund (USFR), which has $17.5 billion in assets.

Shares of WisdomTree (WT) fell about 1% over the past five days. 

Contact Lucy Brewster at [email protected].